Mobile Advertising Is The Baby Huey Of The Media World (And Apple Is Taking The Low Road)

0

Editor’s Note:This guest post was written by Frank Barbieri, a serial entrepreneur and sometime blogger. You can follow him @frankba.

I had dinner last week with a senior exec from a global advertising holding company who asked what I often get asked these days, “What’s going on with mobile advertising?” it’s a timely question as last week Apple announced they were lowering the buy-in price for iAds from $500,000 to $100,000 and increasing the publisher revenue share from 60% to 70%. The move seems innocent enough, but with a little inspection is actually very worrying for a segment still struggling to shake off its inferiority complex, and potentially chilling for many innovators and entrepreneurs.

This person has a total media budget in the tens of millions annually, and for the first time since she started buying mobile, she decreased her spend over the previous two quarters and expects to decrease even more in 2012. Why? Perceptual and brand attitudinal data consistently comes back as not even outperforming search engine marketing.

Mobile advertising has become the Baby Huey of the media world: it’s huge and lumbering, but not mature. Analytics, measurement and targeting have not caught up to where online is, exactly when we’re hearing inventory volume is set to surpass online. Neither Comscore nor Nielsen rank the top mobile apps like they rank the top online properties by category and unique users. Nor do they rank ad networks. Phone and operating system manufacturers as well as the carriers have created fragmented and feature poor cookie environments on phones. What is seen as standard operating procedure online, the use of cookies to target users and understand usage, is treated as heresy in mobile.

This lack of basic advertising infrastructure means it’s hard to manage and measure brand campaigns. Performance is a different story as you just spray massive volume and pay for the converted. But with brand advertising you have to tune the campaign to give the right audience the right message the right amount of times in the right context to move the needle on campaign objectives. All this becomes near impossible without the simple help of a cookie. Only in isolated cases is buying brand advertising on mobile valuable. For instance buying direct from content brands with huge audiences and registered targeting data, like Pandora and The Weather Channel. Or buying video where brand studies still consistently show attitudinal value. Otherwise it’s just too hard to buy quality at scale.

Look at the somersaults Millennial Media, the largest North American “independent” ad network undergoes just to try and replicate simple cookie functionality to target a unique user (from their S1 filing):

MYDAS then runs a proprietary set of algorithms to analyze multiple data points from the device, carrier and app to statistically determine, on an anonymous basis, the likely unique user of the device and the app requesting the ad.

Seriously. Enter hoop, commence jumping. Ad platform managers I’ve spoken with are now worried that even this will get worse as Apple deprecated unique phone identifiers in iOS 5 and is poised to cloak UDIDs from apps in iOS 6. This is one of the data points Millennial surely uses as do many ad platforms and it means there will be one less credible way to ensure a unique user is targeted. This means brand advertisers will again buy less at lower prices.

No doubt consumers have strong opinions about companies using and storing data on their phones, and they should have controls and transparency. But shouldn’t the browsers at least shoot for parity with the web? Isn’t that a better experience for consumers in the end? Where cookie infrastructure feeds a revenue model and users always have the option to turn cookies off. That revenue model in turn allows great content and apps to flow. Simple unique user targeting is foundational to online ad spending and in mobile we’re using magic potions to describe a “likely” unique user. Ad spend will never catch up to online with these constraints. That will eventually hurt developers and end users’ access to great content and apps.

Apple’s strategy now is to help itself while it hurts the industry. iAds can identify unique users through iTunes registration and maybe they’ll even reserve UDID information for themselves as a trusted steward of consumer privacy. It just so happens that that stewardship creates an unfair advantage in the ad network space where networks will have trouble competing. Machiavelli would have noted with glee the timing of the announcement and Millennial Media’s expected upcoming IPO.

Frankly Apple doesn’t care as much about advertising revenue as they do about happy publishers. As the lack of ad infrastructure depreciates the value of developer inventory, Apple is providing a life support alternative in the form of higher revenue shares. This is a short-term fix and bad for the industry as buyers like the one referenced at the beginning of this post want to see a vibrant ecosystem of sellers and selling technology to increase their spend to online levels. The move is bad for most publishers no matter what the revenue share.

Apple could have easily taken a position to build quality and value in the mobile brand advertising ecosystem by addressing the infrastructure problems rather than pretending that they alone can support the segment. As one platform product manager put it to me, They could have designed a “reliable, and privacy conscious third-party tracking mechanism” that all networks and developers could use. This would help networks and brands to better track and target users and ad usage across properties, web and app. It would lead to a well spring of new ad innovation on iOS devices. This would have started to build the infrastructure for brand buying at scale with confidence and credibility. Users would get higher quality advertising. Developers get more dollars and Apple wins by having happy developers.

What they did instead is tell advertisers they are slashing prices and opening up the bargain bin. And they told developers that they’ll be happy with the new benevolent ad dictatorship and sole innovator. Shame. Mobile advertising was very close to its Cinderella moment, and Apple just decided to keep the glass slipper and close the ballroom doors.

BioFrank Barbieri is a serial entrepreneur, angel investor and startup adviser. With a background in product management and business development, he has held positions at Fortune 100, mid-size, and start-up companies.
He has been Chief Executive Officer & Founder of Transpera, Chief Product Officer, SVP Corporate Development at YuMe and Group Product Manager at Microsoft among other roles. His first …